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Bloomberg: Web wide open
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September 24, 1998: 10:35 p.m. ET
Media entrepreneur remains skeptical about the prospects for Internet business
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NEW YORK (CNNfn) - Wall Street's fervor over Internet stocks resumed Thursday, as eBay exploded in the marketplace, proving investors are still willing to bet big on the future of the Web.
Michael Bloomberg, however, says the infatuation may be seriously misguided. Bloomberg, founder of a multi-sided business news company that bears his name, discussed Web commerce on "Moneyline News Hour with Lou Dobbs." Here are portions of that interview:
LOU DOBBS: Michael, you have, I know, sort of tentatively dealt with the Web for years. You still are not a believer.
MICHAEL BLOOMBERG, FOUNDER, CEO, BLOOMBERG LP: Well, I'm a believer, but I don't think that it changes the fundamentals. People are going to do business face-to- face. What the Web does is, it provides a tool to handle the money side of the transaction, or to get some information between buyer and seller. But we're not going to start doing everything electronic commerce.
DOBBS: Now, you, in your own magazine, wrote an article in which you said you'd rather own, I believe, a steel company than an Internet.
BLOOMBERG: (Laughs) Well, I would rather start a steel company. You start an Internet company, everybody piles on, does the same thing. You start a steel company, they'll leave you alone and you can have a real business.
DOBBS: And even after watching eBay and a 31-year-old end up with the net worth...
BLOOMBERG: Well, I don't know what eBay does. I tried to ask that question a number of times. His company is worth roughly $2 billion on the first day it trades. And as far as I know, they really don't have a substantial business.
DOBBS: And also, a number of writers have suggested that your company, with a premiere product in the space, faces a great threat from the Internet. It doesn't concern you at this point?
BLOOMBERG: No, I saw the articles. What they missed the boat is we've always had publicly available information. What we do is we provide value added, in terms of taking the information, cleaning it up, getting it to you, letting you do things with it. If somebody else comes along and does the same thing, we'll have competition. But you don't do that over the Internet and you don't do it for nothing. It would be a high priced product. That's not our problem.
DOBBS: So you're not concerned about a bridge? You're not concerned about...
BLOOMBERG: I'm concerned about everybody. We have to go every day and make the product better, and find ways to make our product more cost-effective to our customers, just like every other business in the world.
DOBBS: Michael, Long-Term Capital. This bailout, and that's what it is, by Wall Street, by the Fed: How concerned are you about the quality of the balance sheets on Wall Street right now?
BLOOMBERG: Well, the market is telling you that they're very worried about brokerage firms and banks. That these institutions have trades on that they don't know whether they're going to be any good, and you won't find out until maturity. There really is a change. I think it's very tragic what happened. John Meriwether is a very smart, very honest, very nice guy. He had a lot of other people. There are human beings behind these numbers that we so glibly talk about.
But the trouble is we always depend on technology, whether it's the Internet or anything else, and sort of put -- stop -- put things in perspective and say, "What could go wrong? Am I too big for the market place, or is it conceivable that a country would walk away from all its objections, the way Russia always did? And if that's the case, what's the downside? Am I so leveraged that if things don't go exactly according to the script, I could get into trouble?"
DOBBS: Well, obviously, several hedge funds have moved into that position.
BLOOMBERG: Yes.
DOBBS: And you talk about John Meriwether, a bright, capable man...
BLOOMBERG: Absolutely.
DOBBS: ... with some initiatives into the stock market. Also, the human side is a lot of investors in that hedge fund. We talk a lot...
BLOOMBERG: Long-Term Capital had very large, wealthy individuals as investors. What worries me is that if you look at the owners of these Internet stocks, those are individuals who don't have big net worths, and they're trading and they think these things will go up forever. And if you go back and look at the biotech stocks in the '80s, they didn't all go up and they didn't all survive, and maybe this is different, but the proof is still to be shown.
DOBBS: Well, you brought us back to Internet stocks. These multiples are by any definition, any standard, historically out of sight, unprecedented. At the same time, we have liquidity issues, whether it be this hedge fund, the Meriwether funds or others. We have a global economic strain on the system that's incredible.
Give us your best judgment about how this all works its way through.
BLOOMBERG: Well, the worrisome things are not Washington. The stock market doesn't care about what happens with Bill Clinton's problems. The stock market cares a little bit about Russia. You've got a country with a bunch of nukes that could split up. The economy is really the big issue.
Japan carries Southeast Asia, Europe has started to slow down. And there's some real fears that in the United States, the earnings growth is just not going to be there to support the prices, and you can see that: Coca-Cola, a great company, run by a very smart guy, down a third; Gillette, the same thing; Disney, the same thing; Time-Warner, I saw, was off the top today.
These are all companies with real businesses, and the earnings multiples are at the high-end of any historical range. That's fundamentally different than the Internet stocks. They don't trade on multiples. 
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